FINRA

The Financial Industry Regulatory Authority, commonly known as FINRA, was created in 2007 through the consolidation of the regulatory functions of the National Association of Securities Dealers (NASD) and the member regulation operations of the New York Stock Exchange. Although it is a private nonprofit organization rather than a government agency, FINRA operates under the oversight of the SEC and has the authority to write and enforce rules governing the conduct of its approximately 624,000 registered representatives and more than 3,400 member firms.

FINRA's regulatory mandate covers a wide range of brokerage activities. It oversees the registration and licensing of brokers through examinations such as the Series 7 (General Securities Representative) and Series 63 (Uniform Securities Agent State Law) licenses. Before an individual can sell securities to the public, they must pass the relevant FINRA examinations and be registered with FINRA through their employing firm.

The organization also operates the BrokerCheck database, a free public tool that allows investors to research the professional backgrounds, credentials, and disciplinary histories of brokers and brokerage firms. BrokerCheck reveals whether a broker has faced complaints, arbitration awards, regulatory sanctions, or criminal charges — information that every investor should review before opening an account.

FINRA operates one of the largest securities dispute resolution forums in the world. When investors have disputes with brokerage firms, they typically resolve them through FINRA arbitration rather than litigation. This arbitration process is generally faster and less expensive than going to court, and most brokerage account agreements require customers to use it.

On the market integrity side, FINRA monitors trading activity across U.S. equity and fixed-income markets for signs of manipulation, fraud, and rule violations. It cross-references trading data with news events, corporate disclosures, and other information to identify suspicious patterns. Violations can result in fines, suspensions, or permanent bars from the securities industry. For everyday investors, understanding FINRA's role is important because the broker-dealer through which you invest must comply with FINRA rules, including suitability standards that require brokers to recommend investments appropriate for your financial situation.

BrokerCheck: FINRA's BrokerCheck is a free online tool available at BrokerCheck.FINRA.org that allows the public to research the professional backgrounds of brokers and brokerage firms registered with FINRA. A BrokerCheck report for an individual broker includes employment history at registered firms, licensing and examination information, and disclosure events — which cover customer disputes, regulatory actions, civil judicial proceedings, financial events such as bankruptcies, and criminal matters. For brokerage firms, BrokerCheck shows the firm's registration information, ownership structure, and regulatory history. FINRA requires brokers and firms to keep their information current. Industry best practice for any investor opening a new brokerage account or engaging a financial professional is to first pull a BrokerCheck report. A history of multiple customer complaints, regulatory sanctions, or terminations for cause are all serious red flags that should prompt careful scrutiny before proceeding.

FINRA Arbitration: When investors have disputes with brokerage firms — including claims of unsuitable recommendations, unauthorized trading, churning, or outright fraud — the primary resolution mechanism in the United States is FINRA arbitration rather than court litigation. Virtually all retail brokerage account agreements contain a mandatory arbitration clause requiring disputes to be resolved through FINRA's forum. FINRA's Office of Dispute Resolution administers one of the largest securities arbitration programs in the world, resolving thousands of cases annually. The process involves filing a Statement of Claim, discovery, and a hearing before a panel of arbitrators drawn from FINRA's roster, which includes both industry and non-industry (public) arbitrators. Arbitration decisions are generally final and binding with very limited grounds for appeal. For smaller claims, FINRA offers a simplified arbitration process with a single arbitrator and no in-person hearing. Investors pursuing arbitration are encouraged to retain a securities attorney experienced in FINRA proceedings, as the procedural and evidentiary rules differ significantly from civil court litigation.